Shutdown's Permanent Toll on Economy Is a Small One

By year's end, GDP will be 0.02% smaller because of the shutdown
By Newser Editors and Wire Services
Posted Jan 28, 2019 11:00 AM CST
Shutdown's Permanent Toll on the Economy: $3B Loss
In this Oct. 26, 2018, file photo the rising sun silhouettes the US Capitol dome at daybreak in Washington.   (AP Photo/Alex Brandon, File)

The federal government shutdown will cause slight permanent harm to the economy—about $3 billion—according to a report Monday by the Congressional Budget Office. The report says the five-week shutdown has slowed growth in the near term but that most of the lost growth "will eventually be recovered," reports the AP. Overall, CBO predicts that just $3 billion in lost gross domestic product will be permanently lost, a modest figure in a $20 trillion-plus economy. By year's end, CBO says, GDP would be just 0.02% smaller because of the shutdown, which shuttered many domestic agencies. Most of the 800,000 furloughed federal workers are returning to their jobs Monday.

More broadly, the report estimates a drop in GDP growth to 2.3% this year, down from 3.1% last year, as the effects of President Trump's tax cut on business investment begin to drop off. It also says that the US budget deficit will hit $897 billion this year, up from $779 billion. The CBO credits the 2017 tax bill—which cut corporate and individual income taxes by $1.9 trillion over a decade—with a burst in growth last year, but it says that this year "the boost that recent tax legislation gave to business wanes." The report calls out "much more significant effects on individual businesses and workers. Among those who experienced the largest and most direct negative effects are federal workers who faced delayed compensation and private-sector entities that lost business. Some of those private-sector entities will never recoup that lost income."

(Read more government shutdown stories.)

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